In 2004, Congress passed a law that changed how deferred compensation was taxed. If a compensation package satisifies the rules in Section 409A then when stock is used as compensation, it is taxed right away rather than at redemption (say when there is an acquisition or IPO). Some CPAs predicted it would change how firms pay CEOs. Has this law impacted
- a startup's decision to pay a new hire with equity?
- the composition/type of equity that is paid?
If it does, it would possibly alter the kind of people that a startup can hire and even how much VC money has to be raised (because they need cash for salaries).